The US sees its annual inflation drop to 2.3% in April, its lowest level since February 2021, with a monthly CPI increase of just 0.2%.
The core inflation remains stable at 2.8% over one year, indicating controlled but incomplete disinflation according to Federal Reserve criteria.
Despite these positive signals, the Federal Reserve remains cautious: markets no longer anticipate a rate cut before at least July.
US Inflation Slows Down in April
The Consumer Price Index (CPI) released this Tuesday shows softer inflation than expected in the United States. In April, annual inflation slowed to 2.3%, its lowest level since February 2021. A sigh of relief for the markets, even though the Federal Reserve is still not ready to pull the trigger on a rate cut.
Inflation Keeps Cooling Down
The overall CPI increased by 0.2% in April, below expectations (0.3%), after a decline of -0.1% in March. Therefore, annual inflation slows down to 2.3%, from 2.4% the previous month. For core inflation, excluding energy and food, the monthly increase reaches 0.2%, while the annual rate remains stable at 2.8%, exactly as expected.
The markets reacted immediately: Bitcoin surged to $103,800, recovering its losses from the night. Futures on US stock indices turned green, while yields on 10-year Treasury bonds slipped by one basis point, to 4.44%.
Fed Stays the Course: Patience First
Despite these good figures, no change in direction is expected from the Federal Reserve. Jay Powell reiterated last week: caution is the order of the day. And the markets are beginning to accept it. The likelihood of a rate cut in June has fallen to…. 11%, from 80% a month ago. Even for July, the market now sees 62% chance of the Fed staying put, compared to only 7% in early April.
The easing of trade tensions with China and the decline in inflation support the central bank’s wait-and-see strategy. In other words: no premature pivot, even if the numbers are in its favor.
